Owning a business doesn’t always mean building one from the ground up. If you can secure the necessary funding, acquiring an established business with a proven track record can be a strategic and rewarding investment. The UK’s mergers and acquisitions market is booming, with deals increasing by 66% in the first half of 2024, reaching a total of £68 billion. But how do you finance a business purchase, and where do you find the right lender?
A business purchase loan is designed to provide the capital needed to buy an existing company. These loans facilitate management buy-ins (MBIs) and management buyouts (MBOs), offering a pathway to ownership for both external investors and existing management teams.
A management buy-in (MBI) occurs when an external management team acquires a business and replaces its leadership, bringing in fresh expertise. Conversely, a management buyout (MBO) allows current managers to purchase the company from its existing owners, ensuring continuity and stability.
Securing a business purchase loan requires choosing the right lender, a critical step in a successful acquisition. Different lenders specialise in various types of financing, and factors such as industry focus, interest rates, loan terms, and reputation should all be considered. Assessing a lender’s experience in business acquisitions and the flexibility of their finance products is essential to securing the right funding.
Lenders evaluate applicants based on several criteria, including credit history, business experience, and financial guarantees. A strong personal and business credit history increases the likelihood of loan approval, while lenders also assess the profitability and stability of any existing business ventures. Collateral, such as equipment or property, may be required as security, and documentation, including tax returns, bank statements, and business valuations, must be in order. A well-prepared business plan further strengthens the application by demonstrating strategic vision and projected financial growth.
There are multiple funding options available for business purchases. Unsecured business loans, while offering flexibility, often come with higher costs and borrowing limits. Asset finance leverages existing business assets as security, while invoice finance allows borrowing against outstanding invoices, accelerating cash flow. Property-backed loans provide funding by using real estate as collateral, offering larger sums for acquisition purposes.
Time Finance specialises in asset-based lending (ABL), combining multiple financing solutions into tailored packages. Their expertise in property-backed loans, invoice finance, and asset finance enables them to offer significant capital to support business acquisitions, ensuring seamless transitions and financial stability.
For those looking to enter business ownership through acquisition, understanding the right funding solutions is key. By leveraging the right financing options, entrepreneurs and management teams can secure thriving businesses without the challenges of starting from scratch.
Time Finance plc (LON:TIME) is an AIM-listed business specialising in the provision or arrangement of funding solutions to UK businesses seeking to access the finance they need to realise their growth plans. Time Finance can fund businesses or arrange funding with their trusted partners through Asset Finance, Invoice Finance, Business Loans, Vehicle Finance or Asset Based Lending.
